co-ordinating cash in retirement

[mathjak107]

first off just want to introduce myself as i am new here .

i have been reading harry's books since the 1980's and even used the pp decades ago  but wanted more growth.

i am retiring in 5 weeks  and have been preparing for this for decades.

i have been using the fidelity insight newsletter since 1987  with great success.

most of that time was spent in the growth model.

about 7 years ago i toned things down to a mix of their growth and income model ( about 70% equities ) and their income and capital preservation model. (about 26%) equities.

i am very happy with the growth and income model so for now i am keeping that . but i put the 1/2 that used the income model in the pp this week.


i felt the risk to that model was greater than the potential rewards at this stage since it is only equity funds and intermediate term bonds.

but now merging the 2 portfolio's has left us with 7 figures in each and the cash is quite a bit now and that is my question.

initially i set a side 2 years of withdrawals  in cash instruments to cover this years spending and next year.  our year will start aug 1 when i retire.

well coupled with the permanent portfolio i now find i am holding 500k in cash which is an awful lot. .

the 2 years we set a side plus the cash from the permanent portfolio end up being quite a bit.


so how are you folks that are retired handling the cash and withdrawal end of things ?

[iwealth]

Congrats on the retirement.

Don't have too much to add besides pointing you to a relevant past discussion:

http://gyroscopicinvesting.com/forum/pe ... in-the-pp/

And then some others:

http://gyroscopicinvesting.com/forum/pe ... ic-graphic
http://gyroscopicinvesting.com/forum/pe ... -pictures/
http://gyroscopicinvesting.com/forum/pe ... awal-rate/
http://gyroscopicinvesting.com/forum/ot ... or-a-myth/

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Many subscribe to the idea of withdrawing living expenses from cash. From a portfolio performance perspective, it makes little to no difference, but it's a simple and elegant way to deal with your income requirements. If I was in your shoes, I'd probably do a CD ladder with the excess beyond two years worth of living expenses. May as well earn something on that money.

[MachineGhost]

i have been using the fidelity insight newsletter since 1987  with great success.

most of that time was spent in the growth model.

I checked it out and its interesting as far as what it does not do, which is provide relative strength picks as other Fidelity newsletters seem to do.  What exactly is their methodology and does it make enough of a difference in the time frame over buying a market-cap weighted index fund?

[Tyler]

Everything is relative. Yes, $500k is a lot of cash. But $2mm+ is a lot of money. Nice work!

How large are your annual expenses as a percentage of your total investments?  That might change the advice you get.

[mathjak107]

i have been using the fidelity insight newsletter since 1987  with great success.

most of that time was spent in the growth model.

I checked it out and its interesting as far as what it does not do, which is provide relative strength picks as other Fidelity newsletters seem to do.  What exactly is their methodology and does it make enough of a difference in the time frame over buying a market-cap weighted index fund?

they just put well balanced models together and nudge them with fund swaps as the big picture changes . funds may not even beat their index's individually but by exploiting different funds at different times  working together  they better than individually.

i can put models together in my sleep but what i use them for is keeping me from myself. i am always a tinkerer , thinking i know better. i would always think about my next move or second guess my last.

by subscribing for over 25 years  it took the pressure off me to make decisions and for me that is where the value is.

the growth model did take 100k and turn it in to 2.1 million while the s&p 500 was at 1.6 million. 

[mathjak107]

Everything is relative. Yes, $500k is a lot of cash. But $2mm+ is a lot of money. Nice work!

How large are your annual expenses as a percentage of your total investments?  That might change the advice you get.

we will retire where we live in queens in nyc so cost of living is high.  i managed to get to 3 million  . most was through investing in nyc real estate with one of the countries biggest real estate moguls as a partner.

we bought co-ops over looking central park with original  rent stabilized tennts and then buy out the leases for 100k and sell the apartments .  we also held commercial lease rights  which were sold last year in a very high profile sale to an investor group.

as far as retirement income  we will have a 23k pension coming in  , about 35k in social security for the both of us if i file at 63.  and the rest from our portfolio's.

i am 62 and playing ss by ear. my wife is collecting now but i will see how markets do.

rather than sell assets at a loss i rather file for ss earlier. but time will tell .

we set a budget of about 130k  which in nyc is like 75k anywhere else out west or south.


i want to read all the links above .  it is so hard to wrap your arms around this when changing strategy weeks before  retiring .


i had everything in place  with the other portfolio's and was ready to rock .  but now we have a lot more cash than we planned by going to the pp

[Tyler]

So accounting for the pension and SS, you have about a 2.4% withdrawal rate.  That's wonderful.  I'm in right about that same spot right now, only with the absolute numbers scaled way back.

You have about 17% cash overall.  Or almost 7 years of expenses.  I personally don't think that's too high, especially with the tilt towards more volatile stocks with half your portfolio.  For comparison, I like to keep my cash at the PP-recommended 25% which is almost 10 years of expenses for me atm.  That kind of buffer will let you weather any extended market storms that pop up along the way, easily cover any unexpected expenses, or perhaps help you put off SS for a while longer. 

You've done a great job of getting yourself to this position.  IMHO, I'd trust your plan and enjoy having all that cash around. 

[mathjak107]

thanks.

i will see how things go with the PP as  low rates and high stock valuations are still an untested cobo.  if things go well i may sell off 20% of the growth and income model a year and over the next 5 years shift it in to the PP.